Losing Financial Aid Causes Students to Drop Out of College

By Mark Kantrowitz
on November 7, 2016

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A study by the Education Advisory Board (EAB) found that all students, regardless of financial need or academic performance, are more likely to drop out of college if they lose financial aid. The more money that is lost, the greater the likelihood that the student will drop out of college.

The impact seems to be monotonic, meaning that greater changes in the amount of financial aid correlate with greater changes in outcomes. For example:

Students who lose $1,500 to $2,000 in financial aid are 3 percentage points more likely to drop out of college.

Students who lose $2,000 to $4,000 in financial aid are 4 percentage points more likely to drop out of college.

Students who lose $4,000 to $6,000 in financial aid are 9 percentage points more likely to drop out of college.

Students who lose more than $10,000 in financial aid are 19 percentage points more likely to drop out of college.

Increases in the amount of financial aid, on the other hand, lead to increases in college graduation rates. For example, students who grain $1,500 to $2,000 in financial aid are 3 percentage points more likely to graduate.

This data suggests that colleges should not only pay attention to the relationship between financial aid and financial need, but also to changes in the amount of financial aid from one year to the next.

Several colleges have found that emergency aid funds can make a big difference in whether a student stays in school, when the student is faced with unanticipated financial difficulties. The EAB research shows that bigger amounts can make a bigger difference.